Freddie Mac and Fannie Mae will be the primary reason behind the mortgage crisis. These federal government supported enterprises distorted normal market risk mechanisms. There is no panic on Main Street and in sound financial institutions. The problems are in high-risk finance institutions and on Wall Street. While all financial intermediaries are being impacted by liquidity issues, this is mainly a bailout of poorly run financial institutions.
It is really important that the bailout not damage well-run companies. Corrections are not all bad. The marketplace correction process removes irrational competitors. There were lots of poorly handled institutions and made financial decisions through the real property growth badly. It is important that any rules post “rescue” punish the poorly run institutions rather than punishing the well-run companies. A significant and immediate taxes credit for purchasing homes will be a far less expensive and more effective treat for the home-loan market and economic climate than the proposed “rescue” plan. That is the casing value problems.
It will not make financial sense to purchase credit credit card loans, automobile loans, etc. The federal government should directly purchase housing resources, not real estate bonds. This would include houses and plenty under building. The guaranty of money funds by the U.S. Treasury creates tremendous risk for the banking industry. 100,000 per customer. An arbitrary, “out of nowhere” warranty of money funds creates risk for the taxpayers and significantly distorts financial marketplaces. Protecting the banking system, which is managed by the Federal Reserve fundamentally, is a set up federal government function.
It is totally unclear why the federal government must or should bailout insurance firms, investment banks, hedge money and international companies. It is rather unclear how the nationwide authorities will price the problem real estate property. Priced too low, the real property markets shall be worse off than if the bail out didn’t exist. Priced too high, the taxpayers will take huge losses. Without a selling price, how will you determine the value rationally?
The proposed personal bankruptcy “cram down” will severely negatively impact home-loan markets and will harm well-run institutions. This provides an incentive for homeowners who are able to pay their mortgage loans but have a loss in their home, to consider bankruptcy and drive losses on banking institutions. This will substantially raise the risk in mortgage lending and make mortgage pricing much higher in the future. Fair Value accounting should be changed immediately.
It can not work when there are no market prices. If we had Fair Value accounting, as interpreted today, in the early 1990’s the United States financial system would have crashed. Accounting ought not to drive economic activity, it should reflect it. The proposed new merger accounting rules should be deferred for at least five years. The new merger accounting guidelines are creating doubt for high-quality companies who might potentially purchase weaker companies. The primary beneficiaries of the proposed rescue are Goldman Morgan and Sachs Stanley.
- Maximize your Capital Cost Allowance (CCA) income tax claim
- Line of credit
- 1972 – born
- Low risk business in comparison to other investment
- As profit expectation remains high due to high prices, it encourages investment in some way
- Exchange financial assets for his or her customers, typically a function of brokers and dealers
The Treasury has lots of smart individuals, including Hank Paulson. However, Treasury is totally dominated by Wall Street investment bankers. They don’t know about the commercial banking industry. Therefore, they can’t be relied on to objectively assess all the implications of authorities’ policy on all financial intermediaries. The decision to protect the amount of money funds is an obvious exemplary case of a material insufficient insight into the risk to the full, total financial system. Arbitrary limits on professional settlement will be self-defeating. With these limits, only the failing financial institutions will take part in the “rescue,” making this plan an enormous subsidy for incompetence effectively. Also, how will companies attract the leadership talent to control their business effectively with irrational compensation limits?
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